5 stocks that contributed 65% of incremental Nifty EPS in Q3; do you own any?

Despite positive index returns over the past year, Nifty50 earnings expectations are moving in the opposite direction, with select names contributing to nearly two-third of gains. Select brokerage firms have highlighted widespread EPS downgrades for FY26 and FY27, raising questions over earnings momentum, sectoral resilience, and the sustainability of current market valuations.

Nifty50 earnings per share (EPS) estimates for FY26E and FY27E have seen notable reductions, says a report from JM Financial. While the Nifty50 index recorded a 7.7% return from January 2025 to January 2026, consensus EPS estimates for FY26E and FY27E declined by 7.4% and 4.7% respectively over the same period.

Although Nifty50 returns outpaced EPS cuts over the year, the breadth of downgrades in January signals caution for near-term earnings optimism. It underscored shifting earnings momentum across several sectors, driven by company-specific and industry-wide factors.

Motilal Oswal Financial Services notes marginal downgrades in Nifty EPS projections for FY26 and FY27. 199 companies in the MOFSL Universe and 31 Nifty constituents had reported results, representing 66% of estimated Nifty PAT and 72% index weightage. These companies accounted for 64% and 66% of estimated PAT for the MOFSL and Nifty Universe, respectively,

Aggregate earnings for these 199 companies grew by 14% year-on-year, matching MOFSL's forecast. Growth was led by Metals (59% YoY), Oil & Gas (15%), BFSI (8%), Technology (12%), and Automobiles (18%), together contributing 80% of incremental YoY earnings.

Nearly half of the Nifty50 components—specifically 48%—experienced a downgrade in FY27E EPS forecasts during January, with telecom, pharmaceuticals, consumer, banks, metals & mining, oil & gas, cement, and insurance stocks contributing most to the downward revisions.

Sectoral analysis from JM Financial revealed that IT services companies all saw EPS upgrades, while the automobile sector saw 3 out of 5 companies upgraded. Metals & mining, oil & gas, cement, NBFC, and insurance also saw approximately half their constituents upgraded. Meanwhile, pharmaceuticals and telecom were most affected by EPS downgrades.

The brokerage identified Cipla, ITC, Interglobe Aviation, JSW Steel, and Kotak Bank as the companies facing the largest EPS cuts. In contrast, Shriram Finance, Hindalco, Grasim, Tata Steel, and Tech Mahindra recorded the largest EPS upgrades.

Within the Nifty, the 31 reporting companies saw 7% YoY growth, led by HDFC Bank, TCS, Infosys, L&T, and Maruti, said Motilal Oswal. On the other hand, Cipla, ICICI Bank, and Interglobe Aviation underperformed.

MOFSL noted, "large-caps and small-caps deliver in-line results, while mid-cap performance misses our estimates. Large-caps reported 13% YoY earnings growth." Nifty EPS for FY26E was cut by 0.3 per cent to Rs 1,081, and FY27E EPS by 0.4% to Rs 1,262, mainly due to downgrades in ICICI Bank, Interglobe Aviation, JSW Steel, Maruti Suzuki, Cipla, and others.

"Earnings of the 31 Nifty companies that have declared results so far have grown 7% YoY, driven by HDFC Bank, TCS, Infosys, L&T, and Maruti. These five companies contributed 65% to the incremental YoY accretion in earnings," added Motilal Oswal.